7 June 2017

In brief: The ACCC has taken the first major step in its inquiry into electricity retail supply and pricing in the National Electricity Market by releasing an issues paper and calling for submissions by 30 June 2017. The issues paper focuses on three broad areas: the pricing, costs and profits of electricity retailers, market structure and retail competition, and retail customers' interaction with the market. Partner Jacqueline Downes (view CV) and Associate David Mierendorff report.

The ACCC has released an issues paper for its inquiry into electricity retail supply and pricing in the National Electricity Market

The Federal Government directed the ACCC to undertake the inquiry on 27 March 2017 (see the Government's terms of reference).

The ACCC seeks submissions on three broad areas:

1. Pricing, costs and profits in the electricity supply chain

In particular, the ACCC will look at:

the profits and returns made by electricity retailers;

the factors that drive retail electricity costs and prices, including the types and levels of risk faced by retailers;

the impact on retailer costs of vertical integration, the introduction of retail competition, and new and emerging technologies; and

the impact of regulatory differences between states and territories on achieving greater economies of scale.

2. Market structure and the nature and level of retail competition

In particular, the ACCC will look at:

the level of competition between retailers, and the ways that electricity retailers compete (including through marketing and discounting);

any impediments to retail competition, including the impact of vertical integration and barriers to entry and expansion; and

the existence of (or potential for) anti-competitive conduct by market participants, including collusive conduct and the misuse of market power.

3. Retail customers and their interaction with the market

In particular, the ACCC will look at:

any impediments faced by customers in choosing a retailer, including the complexity and presentation of retail electricity offers, and the structure and content of bills;

reasons why customers choose to stay with their existing retailer (or do not consider switching retailers);

the relative importance of price and non-price terms, and the effect of bundling electricity plans with other services;

any differences between customer types and areas of the National Electricity Market;

any misleading or deceptive conduct or other unfair trading practices in retail electricity markets, including through price comparator websites; and

how the ability of customers to make informed choices can be improved, including through technology such as smart meters.

The ACCC requests that responses to the issues paper be provided by 30 June 2017, and notes that the ACCC would also welcome telephone conversations and participation by interested parties in public forums, which the ACCC intends to hold in late July and August 2017. The ACCC also notes that it has already started to request information from market participants directly, and that it will use its compulsory information gathering powers to access information as required.

The ACCC's inquiry occurs in the context of a number of other reviews being undertaken in relation to the supply of electricity of supply in Australia, including:

the Finkel Review into the Future Security of the National Electricity Market (final report to be submitted to COAG in mid-2017);

the review commissioned by the Victorian Government into electricity and gas retail markets (final report to be submitted to the Minister in July 2017);

the AEMC's annual review of retail competition (final report for 2017 to be published by 30 June 2017); and

the review commissioned by the COAG Energy Council into the limited merits review regime for electricity and gas regulatory decisions (changes to the regime are expected to be finalised at the meeting of the COAG Energy Council in July 2017).

The ACCC's preliminary report is due to be provided to the Treasurer on 27 September 2017.

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